Legal Alert: Fourth Circuit Says FMLA Waivers Must be Approved by Court or DOL

Date   Jul 10, 2007

After vacating its prior decision in the case, the Fourth Circuit has again held that a Department of Labor (DOL) regulation interpreting the Family and Medical Leave Act (FMLA) prohibits employees from waiving FMLA rights, even in a post-dispute settlement, unless a court or the DOL approves the waiver.


After vacating its prior decision in the case, the Fourth Circuit has again held that a Department of Labor (DOL) regulation interpreting the Family and Medical Leave Act (FMLA) prohibits employees from waiving FMLA rights, even in a post-dispute settlement, unless a court or the DOL approves the waiver. See Taylor v. Progress Energy (4th Cir. July 3, 2007).

This is the second time the Fourth Circuit has considered this issue in the Progress Energy case. After the court’s first decision against the employer, the DOL filed an amicus (friend of court) brief in support of the employer’s motion for rehearing. The Fourth Circuit granted the motion, vacated its previous decision, and ordered a rehearing so that it could consider the DOL’s arguments.

The DOL regulation at issue in this case, §220(d), provides: “Employees cannot waive, nor may employers induce employees to waive, their rights under FMLA.” 29 C.F.R. §825.220(d). The DOL argued that the regulation should not apply to releases or waivers included in post-dispute settlements. However, the court rejected the DOL’s interpretation, finding that it is inconsistent with the provisions of the regulation.

In analyzing the regulation, the court rejected the DOL’s argument that the word “rights” as used in §220(d) does not include claims. The court noted that there are three types of rights protected by the FMLA: substantive, proscriptive, and remedial. Substantive rights include an employee’s right to take a certain amount of unpaid medical leave each year and the right to reinstatement following such leave. Proscriptive rights include an employee’s right not to be discriminated or retaliated against for exercising substantive FMLA rights. The remedial right is an employee’s right to bring an action or claim to recover damages or obtain equitable relief from an employer who violates the FMLA. Thus, the court held that the regulation, by specifying “rights under FMLA,” refers to all rights under the FMLA, including the right to bring an action or claim for a violation of the Act.

The court also rejected what it described as the DOL’s “evolving argument” – that the regulation only prohibits the prospective waiver of FMLA “rights” not the retrospective waiver of FMLA “claims.” Specifically, the DOL urged the Fourth Circuit to follow the analysis of the Fifth Circuit in Faris v. Williams WPC-I, Inc. (5th Cir. 2003), which held that the regulation prohibits only the prospective waiver of the FMLA’s substantive rights. The Fourth Circuit rejected this analysis, holding that such an analysis would permit an employee to waive prospectively his or her proscriptive and remedial rights under the FMLA. “This interpretation would undermine the purpose of the FMLA and section 220(d) and turn the FMLA’s substantive rights into empty and unenforceable pronouncements.”

The court also held that there is no basis in the FMLA regulation for distinguishing between prospective and retrospective waivers. “Because the word ‘waive’ has a retrospective connotation, the regulation applies to the retrospective waiver of claims.”

The court also noted that the settlement of claims is not permitted when “it would thwart the legislative policy which [the employment law] was designed to effectuate.” According to the court, the FMLA, like the Fair Labor Standards Act, is a labor standards law that provides “a minimum floor of protection” for employees by guaranteeing that a minimum amount of family and medical leave will be available annually to each covered employee. The court held that private settlements of FMLA claims undermine the Congressional objective of imposing uniform minimum standards. “Because the FMLA requirements increase the cost of labor, employers would have an incentive to deny FMLA benefits if they could settle violation claims for less than the cost of complying with the statute.”

Additionally, the court held that settlements of FMLA claims are not analogous to settlements of claims under Title VII or the Age Discrimination in Employment Act. These laws are designed to prohibit discrimination in the workplace; “private settlements further these purposes by imposing a cost on discrimination that encourages compliance.” However, according to the court, settlements that are cheaper than the cost of complying with the FMLA would encourage noncompliance and undermine the Act’s purposes.

Employers' Bottom Line:

The Fourth Circuit’s decision in Progress Energy requires employers to obtain approval from the DOL or a court any time an employee waives the right to file a FMLA claim – including when such waivers are part of a post-dispute settlement agreement or a separation agreement. Although the court stated that the DOL would have little difficulty processing settlements for approval, the DOL expressed a different view, arguing that requiring such approval will create additional burdens on the agency (and courts, when court approval is required) and "harm employees by delaying resolution of their cases." Thus, it may be difficult, for a time at least, to obtain binding waivers of FMLA claims.

It is important for employers to be aware of this decision, although not all courts have taken the same position. Additionally, it is clear that the DOL does not agree with this position, although it has not proposed regulations that would change § 220(d).

The employer has indicated it will file a motion requesting rehearing by the full Fourth Circuit. Ford & Harrison attorneys Edmund McKenna and Tom Walsh will be submitting an amicus brief in support of this motion on behalf of the North Carolina Retail Merchants Association. We will continue to keep you updated with regard to the status of this case. If you have any questions regarding this decision or other labor or employment related issues, please contact the Ford & Harrison attorney with whom you usually work.